South Africa's Chancellor House Denies Sway in Hitachi Contracts

  • Chancellor House says it has no ANC link, as SEC alleged
  • Hitachi only won contract because talks broke down with Alstom

Chancellor House Holdings Ltd. said it’s not connected to South Africa’s ruling party and didn’t have any influence in its partnership with Hitachi Ltd. winning $5.6 billion in contracts to install boilers for power plants as claimed by the U.S. Securities and Exchange Commission.

Hitachi Power Africa Ltd., a venture between Chancellor House and Hitachi Power Europe GmbH, only won the boiler contracts for the coal-fired Medupi and Kusile generating plants in 2007 after talks between state-owned electricity utility Eskom Holdings SOC Ltd. and Alstom SA had broken down, Chancellor House Managing Director Mamatho Netsianda said in an e-mailed response to questions on Tuesday.

“It was only when the financial closure negotiations between Eskom and Alstom broke down, because Alstom kept increasing the price and changing the specification that HPA were invited,” Netsianda said. “This in no way reflects influence on behalf of CHH, quite the contrary.”

Hitachi last month agreed to pay $19 million to settle charges by the SEC that it had “inaccurately recorded improper payments” to Chancellor House. The SEC described Chancellor House as “the ANC’s front company,” which lobbied for its venture with Hitachi to win the boiler contracts. It didn’t accuse Chancellor House of any wrongdoing and Hitachi neither admitted guilt nor denied the allegations, according to the SEC.

‘French Multinational’

Eskom had initially awarded the Medupi boiler contract to a “French multinational,” the SEC said in its complaint. Hitachi learned that there were “difficulties” in the negotiations between Eskom and that company, the SEC said, and “directed Chancellor to help Hitachi win reconsideration of the boiler component of the Medupi power-station contract.”

The news of the settlement with the U.S. regulator triggered an uproar from South African opposition parties and newspapers, including the Mail & Guardian and Business Day.

“CHH has got no connection with the ANC,” Netsianda said. “It is owned by a registered trust,” he said, without adding who the beneficiary of the trust is.

The ANC says it wasn’t involved or implicated in the tender process for the boiler contracts. Hitachi says it is unable to comment because of its settlement conditions. Eskom said its tendering process for the boiler contracts was “open, legitimate and above board.”

Chancellor House didn’t obtain $1 million in success fees, as claimed by the SEC, but it and a women’s group investing in Hitachi’s African unit “received funding for bid preparation in equal measure,” Netsianda said. He confirmed that Chancellor House earned about $5 million in dividends from the venture and that Hitachi bought back its stake, for which it had paid about $190,819, for $4.5 million in 2012.

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